TL;DR
- Kalshi faces wash trading accusations after nearly 1 million identical $5,500 trades were detected in its ETH perps market.
- Trades at that fixed amount generated over $5 billion in Ethereum perpetual futures volume over the past month.
- The platform rejected the accusations and attributed the pattern to its liquidity provider program, which operates with fixed-size orders.
Kalshi rejected wash trading accusations after a analysis by the Wall Street Journal found that more than one third of the speculative trading volume on Ethereum’s price on the platform corresponded to rapid trades clustered around the same amount: $5,500. That repeated pattern would have generated more than $5 billion in ETH perpetual futures volume over the past month, according to the report.
This pattern was not detected solely by the WSJ. The previous week, pseudonymous quantitative analyst Beni, co-founder of Stealth Neolab, had already pointed out that the $5,500 trades accounted for up to 58% of Kalshi’s Ethereum perpetual volume on four separate days. Wash trading consists of simultaneously buying and selling the same financial asset to simulate market activity that does not actually exist.
Kalshi Rejects the Accusations and Points to its Market Makers
The platform’s response was unequivocal. In a blog post published on Tuesday, Kalshi stated that wash trading is “explicitly prohibited in its rulebook” and that there is no evidence of collusion or artificial trading.
The company’s head of cryptocurrency, identified as IcoBeast, added that the platform’s fee structure discourages this type of practice, and that critics may have confused prediction market activity with perpetual futures activity, two businesses that Kalshi operates separately.
The official explanation attributes the pattern to its liquidity provider program: market makers post resting orders with fixed sizes that can be repeatedly executed by different traders, which would naturally produce the accumulation of identical trades.
The U.S. Commodity Futures Trading Commission (CFTC), the regulatory body with jurisdiction over prediction markets in the country, made no statement on the situation. The sector is going through a sensitive moment: a study by Columbia University published last year estimated that roughly 25% of Polymarket‘s volume over the prior three years corresponded to wash trading, though its authors clarified that the platform was not complicit in such activity.
